Tyco Signs On to $5M Deal

October 24, 2002 (PLANSPONSOR.com) - Tyco
International will pay $5 million to set up an investor
education program and an academic corporate governance course
as part of a settlement with New Hampshire securities
regulators.

According to the Boston Globe, the education program
will be designed to teach investors about the mechanics and
risks of investing in corporate securities. Separately, an
academic program on corporate governance will be set up
within the University System of New Hampshire.

The Globe said that under the deal with the New
Hampshire Bureau of Securities Regulation, Tyco does not
admit to the allegations of mismanagement and lack of
corporate control

Tyco chief executive L. Dennis Kozlowski and chief
financial officer Mark Swartz, are accused of looting the
company of millions of dollars, the Globe said. (See
Shades of Enron at
Tyco
).

The agreement alleges that top executives, including
Kozlowski, Swartz, former chief counsel Mark Belnick, and
former director Frank Walsh, misused corporate funds and
engaged in transactions without proper approval, the Globe
said.

In particular, the top executives misused Tyco programs
that provide loans to key employees and to those who are
required to relocate for company business,
the newspaper said.

Oversight Governance Reports

The Globe said the settlement would require Tyco’s new
CEO, Edward Breen, to demonstrate his stated commitment to
strong oversight and spotless corporate ethics by
submitting annual reports on the firm’s corporate
governance for three years.

Mark Connolly, deputy secretary of state and director of
securities regulation, said his office’s investigation
hinged on standards of corporate behavior and director
responsibility contained in state laws.

Though Tyco is nominally headquartered in Bermuda, its
largest management office is in Exeter, New Hampshire and
several senior officers, including Swartz and Kozlowski,
had homes in the state.

“Tyco admits that 25% of the old board of directors is
under some type of investigation or legal action,” Connolly
told the Globe. “The corporation bears responsibility for
that. Tyco wouldn’t be struggling for its corporate life if
these transgressions didn’t happen.”

In a prepared statement yesterday, Breen said, ”We
believe this consent agreement is in the best interests of
our shareholders and employees and reflects the company’s
commitment to a continued presence in New Hampshire.”

The settlement has no impact on other pending legal
actions, including investigations by the US Securities and
Exchange Commission, Manhattan District Attorney Robert
Morgenthau, and the US attorney’s office in New
Hampshire.